When Should You Buy Naked Wines plc (LON:WINE)?

Naked Wines plc (LON:WINE), might not be a large cap stock, but it saw a double-digit share price rise of over 10% in the past couple of months on the AIM. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Let’s examine Naked Wines’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

Check out our latest analysis for Naked Wines

Is Naked Wines Still Cheap?

Good news, investors! Naked Wines is still a bargain right now. My valuation model shows that the intrinsic value for the stock is £0.90, but it is currently trading at UK£0.66 on the share market, meaning that there is still an opportunity to buy now. However, given that Naked Wines’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.

What does the future of Naked Wines look like?

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. Though in the case of Naked Wines, it is expected to deliver a negative revenue growth of -11% over the next couple of years, which doesn’t help build up its investment thesis. It appears that risk of future uncertainty is high, at least in the near term.

What This Means For You

Are you a shareholder? Although WINE is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to WINE, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on WINE for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

If you want to dive deeper into Naked Wines, you'd also look into what risks it is currently facing. Every company has risks, and we've spotted 4 warning signs for Naked Wines (of which 2 are significant!) you should know about.

If you are no longer interested in Naked Wines, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.